French refiners lose €500 M in 2013 on Total strike

Workers at all five of Total’s French refineries have participated in a strike in recent days, demanding the explorer use profit from other parts of the business to pay bigger salary increases. The company has shut plants and plans further reductions in its European refining operations.

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By TARA PATEL

Bloomberg

French refinery losses may reach 500
million euros ($689 million) this year as demand falls and
profit margins are eroded by US imports, according to the
countrys oil lobby.

The situation is very difficult, said Jean-Louis
Schilansky, head of the Paris-based Union Francaise des
Industries Petrolieres, which represents companies including
ExxonMobil and Total, the countrys biggest refiner.

Workers at all five of Totals French refineries have
participated in a strike in recent days, demanding the
explorer use profit from other parts of the business to pay
bigger salary increases. The company has shut plants and
plans further reductions in its European refining operations.

Refiners are mothballing plants across Europe where
overcapacity remains as high as 10 percent, according to
UFIP. Over the past four years LyondellBasell, Petroplus and
Total have stopped refining at their plants at Berre,
Petit-Couronne, Reichstett and Dunkirk.

France now has eight working plants compared with 24 in 1977,
with Exxon operating two, Ineos Group one and Total the rest.

European margins dipped to 13 euros a metric ton this month
after rising as high as 32 euros a ton in February to give an
average of 18 euros a ton for the year, according to data on
UFIPs website. This compares with averages of 34 euros
a ton last year and 14 in 2011.

Cheap gas

French refiners lost about 1 billion euros a year in the
three years between 2009 and 2011 amid an economic slump,
UFIP reported. They broke even last year when margins were
above the 30 euros-a-ton level the organization considers is
needed by refiners to break even.

The regions refiners are struggling to compete with
plants in the US, run using relatively cheap natural gas,
Schilansky said. A shale gas boom in the US has pushed gas
prices lower.

Total has set a target to reduce its European refining and petrochemicals business by 20%
from last year to 2017. As the biggest refiner in western Europe, where it operates eight
plants, the company has borne the brunt of lower margins and
a drop in the consumption of fuel products.

Total reported third-quarter profit, excluding changes in
inventories, fell to 2.72 billion euros from 3.36 billion
euros a year earlier, the Courbevoie, France-based company
said in October.

Total management has no intention to allow workers to
benefit from its excellent results which will make
shareholders a lot richer this year, the CGT union said
in a statement two days ago. The results would allow bigger
pay rises than the 1.2% to 1.5% increase offered by
management, it said.

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